Tails and Dogs
For All Nails #43: Tails and Dogs by Noel Maurer ---- (For essential background on Kramer Associates, see NUBS Presents "Insight".) :Taipei, Taiwan :December 1973 Carl Salazar was a good businessman, and Carl Salazar could read balance sheets. Even ones as long and complicated as Kramer Associate's consolidated business statements. The saldo was a deep deep red. FN1 It had been ever since the Taichung Project. No, it had been ever since the Global War. Tossing away 40 billion pounds on the war had blown a giant hole in the company's balance sheet. FN2 Kramer liquidated practically all its European financial assets to pay for those operations, and had been lambasted in Britain for it. FN3 Later British moves against the company's assets caused further pain. Then came Project Taichung. And the submersible project. And the missile program. Worse yet, unlike regular investments, those projects continued to lose money once they became operational. The satellite project might, eventually, perhaps turn a profit one day -- but the market for orbital communications relays was at best speculative. Anyway, Kramer's rockets were heavily over-engineered for any possible commercial purpose. FN4 Of course, one possibility to cover the capital hemorrhage was arms sales to countries like Australia, Japan, Scandinavia or the CNA. That was a big step, however. Kramer had made some cash selling modern submersibles to the Scandinavians, and obsolete naval surplus to the Japanese, but those markets were only so deep. Japanese purchases were, in fact, falling. Security concerns meant that Kramer never got R&D contracts. The CNA was an enticing market, in theory. Unfortunately, after the Boricuan fiasco Carter Monaghan didn't have the political capital to steer a pence of Confederation military spending to Kramer subsidiaries in that country. And that Liddy hombre seemed to be supernaturally capable of identifying Kramer subsidiaries. One hell of a accountant, Liddy was. FN5 If the CNA wasn't buying, then Britain wasn't buying. Scandinavia wasn't a big market, the Latin Americans were broke, the Japanese and Australians didn't want to depend on a potentially hostile "power," and selling to Germany or Mexico would be clinically insane. It was a dilemma. ---- :Kramer Associates HQ, Taipei, Taiwan :9:00am, 8 February 1974 The Associates' Chief Financial Officer, Eric Kaplan, was a short man, chubby and balding, usually jovial. But not today. "We can sell all the weapons we we like to Taiwan or the Philippines or Korea or Outer Mongolia. It's all just spooning water back into a tank being drained by a garden hose." A slide flashed on the screen. "The investments in developing the Sun-class destroyer, or the Superfly bomber, those are sunk. FN6 We wouldn't make a return on our previous investments, let alone cover the amount we're plowing into developing new systems." Joseph Aquino spoke up. "What about the Scandinavians? They bought those submersibles last year, and they might well be interested in other weapons platforms." Eric Kaplan looked over at Christopher Newman. Blonde and blue-eyed, and fluent in several Scandinavian dialects, Newman had negotiated the Scandinavian deal, and could better answer the question. "Well, the Scandinavians made it clear that this was a one-shot deal. They are busily developing their own missile systems, and don't want to be dependent on East Asian weapons for their defense. We'll be able to sell all sorts of things to them, now and in the future, but we can't count on them to be a regular customer. Certainly not large enough to cover the sunk costs of development." Eric nodded. "We need a long-term customer, someone willing to commit to large-scale procurements, enough to cover our development costs. The Scandinavian purchases barely covered the marginal costs of building the individual submersibles and their missile systems." Newman added, "There are other potential markets." Peng Ting-yi shot that idea down before it could be made more concrete. "You," and that you was, unintentionally, pregnant with meaning, "Cannot be thinking of selling modern equipment to the Australians or Japanese." "No, of course not," said Kaplan. "My point is that this organization is in deep financial trouble, and it's getting worse. Our huge overhead for security operations is only the start." Kaplan clicked through to another slide. "Consider. Our steel operations in the Philippines are losing money. Skilled labor is scarce, the unions are jeffy, and the infrastructure is decaying, but the Philippine government won't less us lay anyone off. Our newer plants in the Cantonese and Fukienese republics are profitable, but are facing strong competition from the Japanese, the Brazilians, and the Mexicans." FN7 Another slide clicked into place. "These are figures from our consumer durables division. They include profits and losses incurred by companies in which we have a minority stake. As you can see, the only profit centers are in the Zollverein, and those profits are slim. Not to mention almost impossible to transfer to Taipei. Since the devaluation, Mexican producers have had an incredible cost advantage." FN8 Marcia Tseng raised her hand. "Aren't wages still much lower in Canton?" Kaplan nodded. "Yes, but Mexican factories are still more efficient, at least on average, and they enjoy lower raw material and transportation costs. Consider the CNA market. Mexico allows some trans-shipment of cargoes from our East Asia facilities, but only some. Combined with the recent border closures, it is the equivalent of an additional ten percent tariff on exports from our overseas facilities. We can avoid some of that by going around South America, but that imposes its own costs. As for our North American facilities, the recent hike in CNA tariffs has helped, but not nearly as much as we'd like. For obvious reasons, we can't lobby openly as long as we're perceived as a potentially hostile power. There are some ways around that, but our influence is limited." FN9 Another slide. "Mining is an equally large sink. Mexico is a net exporter of almost every major industrial metal except tungsten. The devaluation has also given Mexican producers a major cost advantage. The recent trade deal with the Zollverein only cements that advantage. Our mining operations are still in the black, but barely." He paused. "I need not mention the impact of the Traitorous Eight. "Something must be done, or we face bankruptcy." There was silence around the table. ---- :Dozois Golf Course, Taipei, Taiwan :2 February 1974 Carl Salazar didn't really like golf much although he had become very good at it. Ironically, neither did Lin Chi-chao. But golf was a passion in Taiwan. It was where and how business was done. And so, they played. "Hang on," said Lin, as he practiced his swing. Lin was a large man, an unusually large man, a member of the first generation of Chinese to grow up adequately nourished. He towered over Carl Salazar, who was many things, but not tall. Thwack! Lin hit the ball, which sailed off in the wrong direction. "Not terribly bad," said Lin, without irony. They headed off on foot. After all, the whole point of this was to have time to talk and reflect. "Almost as good as Wayne Ellis," said Salazar, mentioning the Australian golf champion. Lin snorted. "I hope not. Australians. Absurd people. Worse than Mexicans, who at least have some grit beneath the veneer of Hispano manners." Salazar nodded, although he disagreed with Lin's assessment of Mexicans. In his experience, Mexicans had long abandoned any remnant of Hispano style. A nation of nacos, in his opinion. But what Salazar said was, "Australians can be overly formal, not to mention stubborn." "Yes. Very insistent." The Prime Minister of the Republic of Taiwan paused for a moment. "The strange thing about Australians is that both forms and substance seem to matter equally to them. If the forms are not right, they won't trust the substance. Yet they never pay attention to the forms, unless the substance is correct. Very strange people." Salazar nodded. "It is understandable, of course." "Of course." They walked in silence for a few more steps. "There are many Chinese who are the same way. Especially in the legislature." They came upon the ball, which had avoided the rough. This time, Salazar lined up his shot. Thwack. Perfect shot. "I hit that?" muttered Salazar. "Yes. Amazing. My ball is that way. Come." They walked over towards the green. "I was in the Navy, you know." "Really?" Of course, Salazar knew this, but this was how Lin did things. "Yes. Commander, in fact. I was XO on a crusier. Strangely enough, the captain was not in the Taiwanese navy at all, but that was just form. The substance of our loyalty was the same." Salazar nodded. "Unfortunately, form can guarantee and determine substance. In the long run. The Australians may have a point." Lin looked at Salazar. The CEO of Kramer Associates looked completely relaxed in his red-and-blue guayabera. "They do. They certainly do." The two men stopped walking. Lin looked at Salazar. "It is strange, you know." Salazar looked back quizzically at the much-younger Lin. "I remember when I took this job, a year ago, after the party congress. Those who were giving up power seemed relaxed, almost relieved. I and the men around me, who had sought power and were now receiving it, felt nothing but dread. You, sir, you look relaxed." Salazar smiled. "I am. I am very relaxed." "Perhaps you should not be." The reference was cryptic to neither of them. "Perhaps not. But then again, were the men you took over from too relaxed as well? Form determines substance." Lin nodded. "That it does, my friend. That it does." They went on with their game. ---- :Kramer Associates HQ, Taipei, Taiwan :9:25am, 8 February 1974 Carl Salazar coughed. "There is a way to cut through the knot, Eric." "How, sir? We're already selling off operations overseas, including trademarks." Kaplan looked worried. That wasn't like him. Marcia Tseng broke in. "We can go back to the Taiwanese government for another loan, sir, but their resources are limited. We'd be using the money to cover operating expenses, which violates our understanding with them." Ting-yi added, "The ruling party faces strong opposition. It won't look good if they have to drag out the Internal Security Act again." "That's not it." Salazar took a breath. "Here's the plan. We sell the military operations to Taiwan. All of them. Most of our ships and planes are already Taiwan-flagged, and many are under the effective control of Taiwanese officers. We just formalize that reality. In return, the Republic government assumes a large portion of our debts." He stood up out of his chair and leaned on his fingers, splayed across the hardwood. "Then we cancel the R&D budget." "What?!!" It was impossible to say who said what. "You heard me. We zero out the budget, and sell the physical installations to Taiwan. That cancels more liabilities. But it gets better. We turn our human capital -- and a good chunk of our remaining physical capital -- from an economic liability into an income-generating asset. With our military responsibilities gone, we can not only receive long-term weapons research and production contracts from Taiwan and the Chinese Community republics, but from Australia and even Japan." He looked around the table. "On a cost-plus basis." FN10 Silence for two seconds. Followed by bedlam. "You can't do that!" yelled Marcia Tseng. "No way!" "Impossible!" and more "What?!"s followed. Several people around the table bolted to their feet. Peng Ting-yi was one of them. "You can't get rid of our deterrent! It's unilateral disarmament. It's a bad choice!" Salazar was a phlegmatic man, but this was too much. "We CAN'T AFFORD IT, Ting-yi!" He took a breath. "It's not a question of choice. We can't pay for our military machine. What would you have us do? Sell our factories? Offices? Mines, real estate? That would work for a while. But it would leave us nothing more than a roving military machine. How would we pay for it? Extorting tribute from the peoples of the Pacific under the threat of atomic annihilation? Turn into everything Mexican propaganda says we are?" No one had ever seen Carl Salazar lose his temper before -- they were shocked into silence. "History forced us into a role that no company should ever have had to play. That idiot at the university, he writes all sorts of fine stuff about how K.A. is really a country, blah blah. FN11 We're not. We're a goddamned company. We've forgotten that because our stock has been worthless for so long. We've forgotten that because politics has forced us to take more responsibility for our employees and their families than any sensible company ever would. We've forgotten that because history has insured that none of us here have much loyalty to any particular nation." He paused again for a moment. "But we're NOT a country. We could try to become an empire, but why? For what?" Carl Salazar sagged for a moment. "I don't see any other options. If anyone else does, I want to hear them, but I don't see any other options." He collapsed back into his seat and rested his forehead on his forefingers for a moment. Then he looked up. "Well, sit down people! We still have work to do." As the surprised board members sat back down, Salazar added, almost beneath his breath, "And we aren't giving up the spooks." FN12 ---- (Proceed to #44A: Un Québécois Errant.) (Proceed to 1974: Not-So-White Trash Nation.) (Proceed to Kramer Associates: NUBS Presents "Insight".) (Return to For All Nails.) Category: Kramer Associates